THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, October 17, 1995 TAG: 9510170275
SECTION: FRONT PAGE: A1 EDITION: FINAL
SERIES: Election '95
SOURCE: BY WARREN FISKE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Long : 139 lines
Candidates for the General Assembly hope to hit winning numbers with voters this fall by offering two starkly different plans for spending the state's lottery profits.
Republicans, led by Gov. George F. Allen, pledge to take the $314.5 million in annual profits out of the state's general fund and return them localities.
Democrats argue that the money already is earmarked for public education and that the GOP plan would hurt schools across the state by taking the lottery millions away.
On the campaign trail, the lottery has become a symbol the candidates are using to highlight their philosophical differences about the direction of state government.
Republicans say their plan underscores their determination to decentralize state government and empower citizens to make more decisions on a local level.
Democrats say the issue emphasizes their commitment to education.
Plenty of misleading statements from both sides are stoking the debate. Beyond the rhetoric, education and municipal leaders are wondering whether there's a spark of commitment behind either party's proposals.
They point out that the Democrats' earmarking of lottery profits for education last winter did not result in one extra penny being appropriated for education and may not in the future. They add that any new money given to municipal governments under the Republican plan could be wiped out by another GOP pledge to eliminate a local business tax.
``Both parties are playing a shell game with the lottery this year,'' said Robert Jones, president of the Virginia Education Association.
``I hate to look a gift horse in the mouth,'' said Virginia Beach Mayor Meyera Oberndorf, president of the Virginia Municipal League. ``But it's better to do that than be taken in by a Trojan horse.''
Here's a close look at the proposals:
THE DEMOCRATS' PLAN: Last winter, Democrats championed the Omnibus Education Act, which reserved all lottery profits for public education. Allen, after unsuccessfully trying to amend the bill to send the profits to localities, signed it into law.
While it sounds grand on paper, the bill gave no extra money to schools: Democrats did not increase funds for education with the new law they're touting on the campaign trail these days. ``If the lottery money really was earmarked like the Democrats say, then we should have seen appropriations for education increase by $314 million,'' said Del. J. Randy Forbes, R-Chesapeake.
Republicans and many educators say the bill was a meaningless election-year ruse by the Democrats. They say it's impossible to trace exactly how much lottery money, if any, actually goes to schools.
That's because the lottery is one of many funding sources that flows into the general fund. The $2.3 billion education budget is one of many that flows out of the general fund. No one can say with certainty where an individual dollar of revenue ends up being spent.
Or, put another way, when raindrops fall into a reservoir, can anyone pinpoint whose bathtub they ultimately fill?
House Majority Leader C. Richard Cranwell, D-Roanoke County, argues that the bill did put traceable lottery money into education. He says the bill guarantees that $103 million of profits will be dedicated annually to reducing the disparity between rich and poor schools.
But the disparity money had been budgeted in the 1994 legislative session - a year before the education act passed.
The bill does identify lottery profits as a permanent future funding source for the disparity program. Republicans say that is another meaningless gesture because any legislation can be rendered moot if the General Assembly doesn't appropriate money for its programs.
Some Democrats incorrectly claim that an additional $47 million of lottery profits was dedicated to the purchase of computers for schools this year. In fact, the money was raised through a bond sale by the Virginia Public School Authority.
A few Democrats have suggested that the plan lacks substance. The bottom line, according to Del. Robert B. Ball Sr. of Henrico County, chairman of the House Appropriations Committee: ``It makes people feel like the lottery money now will be earmarked for education.''
THE REPUBLICANS' PLAN: All but six of the 120 GOP legislative candidates this fall signed a pledge to return lottery profits to localities for use in education, public safety or reducing real estate taxes.
House Democrats killed an identical Republican proposal last spring. (Allen had introduced that lottery legislation after his unsuccessful effort last winter to reduce taxes by $150 million was widely criticized for being financed with cuts to municipalities. The governor initially argued that local governments must be weaned of ``wasteful spending habits.'')
Allen says his lottery plan keeps ``faith with the people.'' He says Virginians were promised before they voted in 1987 to start the lottery that its profits would go to localities.
The governor is unable to substantiate his claim, however. When recently asked for specific evidence of the pledge, he replied ``the promise was implicit.''
A review of the legislation passed in 1987, campaign literature and statements by lottery proponents failed to turn up any such statements. The law said only that the money would go into the general fund and supporters told voters that it could be used to finance a variety of state programs or as a hedge against future tax increases.
Democrats say that localities may be in for no windfall at all when the lottery proposal is combined with other elements of the GOP platform. Many Republicans, they note, are pledging to eliminate a local levy on gross business receipts - known as the Business, Professional and Occupational License (BPOL) tax.
Repeal of the levy, which provides municipal governments with $289.2 million a year, would wipe out most gains from the lottery transfer. Some cities would come out ahead. Virginia Beach would gain $7.5 million a year. Others would wind up in the hole if the GOP succeeds on both fronts. Norfolk would lose $474,578 a year. Roanoke would lose $3.8 million.
Allen unsuccessfully sought to eliminate the receipts tax last winter. The governor said he is not inclined to lead a similar effort next year, but suspects other GOP lawmakers may take up the fight.
With or without BPOL, the return of lottery profits to localities would create a $314 million hole in the state budget. Allen says the loss easily could be made up by $350 million in new revenues he expects next year from economic growth.
What Allen and other Republicans don't say is that the state is facing more than $700 million in new spending demands for next year. The list includes money to improve education standards, build prisons, give a cost-of-living raise to state government retirees, compensate federal pensioners who were illegally taxed by Virginia, and provide health care to the poor.
On top of that, Allen says he is still hoping to cut state income taxes.
Democrats have asked Allen to release, before the Nov. 7 elections, a detailed plan explaining how he would pay for his proposals. Allen has declined, saying he will wait until December when he has access to year-end financial projections.
Democrats and many local officials say they fear the unknown. Last winter, they recall, Allen sought to finance his unsuccessful tax cut by slashing money for education, mental health programs, drop-out prevention counseling, aid to local police departments and ``Meals on Wheels'' for senior citizens.
``The lottery goes to the general fund and 50 percent of the general fund is already being returned to localities,'' said C. Flip Hicks, general counsel for the Virginia Association of Counties. ``We want to be sure that one hand isn't giving us something the other hand will take away.'' ILLUSTRATION: Graphic
Virginia lottery history
KEYWORDS: VIRGINIA LOTTERY PROCEEDS EARNINGS LAW by CNB